Ad exchange model reaches Chinese Web cafes

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Ad exchange platform AdECN signed an exclusive agreement with FUHU Ltd. in late September to provide its ad serving technology to the Hong Kong-based media company, a deal that may help shape the Chinese market for online advertising.

FUHU has a license to promote U.S. Web properties that involve social networking, dating, e-mail, video, online gaming and blogging to audiences in 20,000 Internet cafes across mainland China.

"Our goal is to take a next-generation system and introduce it to a still-developing user base," said Kevin Cuxil, FUHU chief technology officer.

AdECN's technology platform automates an auction between publishers and advertisers in real time for every impression. The system aims to add value to both sides of the transaction: Advertisers reach audiences for a fair price, and publishers sell more inventory at higher value.

"This is a tremendous opportunity to demonstrate on a grand scale the power of our real-time auction technology," said Bill Urschel, founder/CEO of AdECN, Santa Barbara, CA.

FUHU's properties get 80 million page views daily in addition to its mobile commerce and network interface controller capabilities.

E-commerce and the Internet are new and growing in China, Mr. Cuxil said, as only a small percentage of the population uses the Internet.

Also, the infrastructure in China does not work to support U.S.-style e-commerce. For example, individuals typically do not have Internet service providers for their homes, and few have credit cards. Therefore, Internet cafes and online retailers bill through individual cell phone plans, as mobile use is more common than personal Internet access.

FUHU has partnerships with major ad agencies and some top telecom companies and broadband infrastructure providers in the country. A limited number of companies can bill directly into China.

"We look at China as kind of an isolated market right now," Mr. Cuxil said.

As a China-based company, FUHU has acted to comply with the nation's regulations. The platform allows for filtering of questionable ads. The Chinese government may be given access to the information before it is broadcast.

U.S. companies advertising in China seem less concerned with direct conversion so far and more focused on branding, Mr. Cuxil said. Ads running in the country are not interactive. Many of the sites also have traditional rate-card systems rather than cost-per-click or cost-per-acquisition rate charges.

"We're really trying to take the U.S. model and concept of advertising accountability to the Chinese market," Mr. Urschel said.

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